Owners of €1m-plus penthouse homes built since 2013 will be at least €16,000 better off as they have escaped having to pay the local property tax (LPT) until 2021 at the earliest, because of a gap in the law.
Finance Minister Paschal Donohoe confirmed that owners of such luxury apartments and homes across the country built since 2013 have escaped the LPT and will remain free of the charge for another two years.
For example, a €1m apartment built in 2012 is liable for €1,755 in LPT annually while a similar apartment built in 2013 or since has escaped all charges.
Mr Donohoe said that up to 80,000 homes built since 2013 will remain exempt from the LPT until 2021 at the earliest. Opposition parties have has demanded he fix the “deeply unfair” anomaly.
Labour Party finance spokeswoman Joan Burton said Mr Donohoe must end the inequality and level the playing pitch.
“One of the anomalies which has come to light is that very expensive properties which have been built and bought since 2013, including €1m-plus penthouses in the docklands and the IFSC in Dublin, as well as other expensive homes, because of the gap in the law, don’t have to pay any LPT whatsoever,” Ms Burton said.
“That anomaly must be corrected as soon as possible. The minister must provide a level playing field so that those in modest homes are not worse off compared to those in vastly expensive new homes.
Confirming that such properties are exempt, Mr Donohoe said: “At the moment, the tax applies to properties that were levied when we last made changes to this tax. If a property like that described by Deputy Burton is exempt, then so is a property that was purchased by somebody for €100,000 or €150,000. Those people do not pay the local property tax either.
“This situation cuts both ways. As Deputy Burton is aware, far more properties have been bought at values below the price of penthouse apartments in the IFSC than those types of apartments.”
Explaining the lacuna in the law, Mr Donohoe said he “accepts the inequity of one property being subject to the property tax while another is not”, but said it is not possible to remedy the problem until the new valuation system in its entirety comes into force in 2021.
“The reason it is not possible to extend the LPT now to new homes that are being built, in the absence of a revaluation for all, is that we would have to tax properties that have just been built on the basis of the 2013 valuation,” he said.
“Then we would be in the situation of taxing one property that existed in 2013 on that valuation and of finding a way to infer the taxable value of a new property to be built that is consistent with 2013 market pricing.”
The number of homes exempt from LPT was almost 62,000 by November 2017.
At the Oireachtas budgetary oversight committee, Department of Finance officials did not dispute suggestions by Sinn Féin TD Pearse Doherty that the figure could exceed 80,000 by the time the exemptions end in 2019.
Concern has also been expressed at the sharp rise of people deferring their payment of LPT since 2013, from 30,600 to 62,000 in 2018.
Deferrals are normally granted on the basis of financial hardship or inability to pay, but there is a growing concern that people are amassing large LPT bills, which accrue interest charges of 4% a year, which will have to be paid on death or on the sale of the house.